SB245 Alabama 2013 Session

Summary

Primary Sponsor

Mark Slade Blackwell

Republican

Session

Regular Session 2013

Title

Insurance Department, reinsurance, regulation, model law adopted, Chapter 5B, Title 27 added, Secs. 27-5B-1 to 27-5B-19, inclusive, added; Sec. 27-5-12 repealed

Summary

SB245 adds a comprehensive reinsurance regulation framework in Alabama to align with federal model rules, including how credits against reserves are allowed and how reinsurers are supervised.

What This Bill Does

It creates Chapter 5B to regulate reinsurance, specifying when domestic insurers can receive credit for reinsurance against their reserves; it introduces criteria for reinsurers to qualify for that credit (licensed, accredited, or certified) and requires certain security or trust arrangements in the U.S. to back reinsurer obligations. It establishes standards for financial strength, regulatory oversight, and reporting for reinsurers, including lists of qualified jurisdictions and the possibility to suspend or revoke accreditation or certification. It also addresses insolvency, notices from liquidators, concentration risk and diversification requirements for cedents, and authorizes the Insurance Commissioner to adopt rules; the act repeals the old Section 27-5-12 and becomes effective January 1 after passage.

Who It Affects

• Domestic ceding insurers: they would be able to claim credit for reinsurance only if the reinsurer meets the new requirements, and they must monitor concentration risk and secure obligations with the appropriate trust or security.
• Reinsurers (domestic, foreign, accredited, or certified): they would face new capital, rating, reporting, and security requirements, may need to place assets in U.S. trusts or other approved forms, and could be subject to regulatory oversight, qualification of their jurisdiction, and potential revocation or suspension of accreditation or certification.

Key Provisions

• Adds Chapter 5B to Title 27 and repeals Section 27-5-12, establishing a new reinsurance framework.
• Aligns Alabama reinsurance regulation with the NAIC Credit for Reinsurance Model Law to protect insureds, claimants, and the public; assets for security must be in the United States if a non-U.S. reinsurer provides security.
• Credit for reinsurance is allowed only when the reinsurer meets the requirements of Sections 27-5B-4 through 27-5B-9, with different eligibility paths for licensed, accredited, and certified reinsurers.
• Requires reinsurers to maintain adequate financial capacity, submit to Alabama examinations, and be domiciled/licensed in a qualified jurisdiction; introduces annual reporting and regulatory oversight for accreditation and certification.
• Mandates the use of trust funds or other approved securities in the U.S. to secure reinsurance obligations, with detailed trust oversight, reporting, and termination rules.
• Creates a list of qualified jurisdictions and sets criteria for recognizing non-U.S. reinsurers; allows suspension or indefinite suspension of certification if a jurisdiction loses qualification.
• Imposes concentration risk rules for cedents (e.g., limits on exposure to a single reinsurer) and requires diversification of reinsurance programs with timely commissioner notification.
• In insolvency scenarios, reinsurance payments are directed to the ceding insurer or its liquidator, subject to statutory protections, and may involve guaranty associations.
• Authorizes the Insurance Commissioner to adopt implementing rules and require ongoing disclosures; effective date is January 1 following passage.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance